Turkish central bank keeps winning

The lira is starting the last week of May with a bang as the Turkish central bank keeps up its response to lira weakness, this time simplifying the rate regime, setting the new key rate in line with the old one, and turning the TRY into a world-beater along the way. The steadfast commitment to tightening is likely to continue with the June 7 decision, and could set off a rebound that will last until the election later next month.

After the emergency rate hike, allowing forex loans to be repaid in weaker lira, and now now simplifying its interest rates, the CBRT is hitting its marks at a time when the global currency herd had it on the ropes.

Unfortunately for Cetinkaya's team, Erdogan isn't going anywhere, and his rigid policies could make a macro situation that isn't that bad into something that actually starts to creak. Add in the possibility that oil prices buck the new consensus and don't come down, and the central bank may be watching its efforts go up in smoke later this summer.

Source: Bloomberg Pro Terminal

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